How to use EarnIn’s Mortgage Payoff Calculator

EarnIn’s mortgage calculator makes it easy to estimate the monthly payments for your new or refinanced home loan. All you have to do is plug in the details:

• Home price. Enter the price of the house you’re buying or the remaining balance on the home you already own.
• Down payment or equity. If you’re purchasing a home, enter your down payment. If refinancing or calculating a payoff plan, enter the equity you have in the home.
• Payment term (in years). Enter the length of your loan in years. The most common payment term is 30 years, but mortgage loan terms can also be 20, 15, or 10 years long. For existing loans, check with your lender to confirm how many years are left.
• Interest rate. Enter your current interest rate if you already own the home or the rate you expect to pay.
• Other monthly expenses (optional). Include details about property taxes, HOA fees, and other costs that impact the monthly mortgage payment.

Once you’ve entered your info, click the button to see your results. You’ll see a mortgage payoff plan based on the home’s sales price and your financing details.

What is a mortgage?

To make the best financial decisions, you have to know what a mortgage is first. It’s a secured loan used to purchase a home or other real estate. The property acts as collateral, meaning the lender can take it back if you default on the loan. Mortgages are the biggest loans most people ever take out, and they usually take a long time to pay back — often as much as 30 years.

A mortgage is a big commitment, and owning and maintaining a home is expensive in itself. If you’re thinking of taking on this type of debt, take the time to learn how to get a mortgage to make sure you’re starting your journey with all the knowledge you need.

Mortgage terminology explained

Whether you’re a first-time borrower or someone refinancing a home you’ve owned for a decade, conversations about mortgages might sound like a whole different language. Here are some of the basic terms to know:

• Principal and interest. The core components of your loan payment are the principal and interest. The principal is the original loan amount, while interest represents the cost you pay to borrow money.
• Down payment. This is the portion of the home’s purchase price that you pay upfront. A larger down payment can help you secure a lower interest rate and reduce monthly payments.
• Loan term. The term is the length of time you have to repay the mortgage loan — usually 15 or 30 years.
• Fixed-rate loan. A fixed-rate loan has an interest rate that always stays the same. Other factors may change over time, but the loan portion of a fixed-rate mortgage payment won’t.
• Adjustable-rate mortgage (ARM). This is a riskier loan type. The interest rate may change periodically, potentially leading to fluctuating monthly payments.
• Mortgage amortization. Amortization is the process of paying off a loan with regular payments. Each payment includes a portion applied to the principal and a portion applied to interest.
• Amortization schedule. The schedule maps out how much of each house payment goes toward principal and interest over the loan term.
• Annual percentage rate (APR). The true cost of borrowing, expressed as a percentage, is the APR. It includes the interest rate plus other loan-related fees and charges.
• Escrow account. In this type of account, your lender collects a portion of your monthly payment for annual expenses like property taxes and homeowners insurance.

Costs associated with mortgages

Part of the reason calculating a mortgage payment is tricky is that the amount you borrow isn’t the only cost you’ll pay. Here are some non-mortgage, home-related expenses to know.

Some costs happen every month or year, like:

• Property taxes. You pay the local government for things like road maintenance, social services, and education.
• Home insurance. This type of insurance protects your home and possessions against damage or theft. Typically it's around 0.25% to 0.5% of the home's value annually.
• Private mortgage insurance (PMI). Lenders require PMI if the down payment is less than 20% of the purchase price. PMI protects the lender if you default on the loan. Typically it's around 0.2% to 2% of the loan amount per year.
• Homeowners association (HOA) fees. If your home is part of an HOA, you have to pay fees.

Some costs only happen once or twice, but they can add up. Here are some of them:

• Closing costs. When you complete the refinance or initial mortgage transaction, you usually have to pay lender fees, appraisals, and title searches.
• Renovations. Renovations are optional, but you should factor in any changes you want to make and their costs.
• Repair costs. Some properties need repairs before they’re livable. You’ll sometimes have time to save up the cash, but some repairs are true emergencies.

Mortgage payment formula

Wondering how to calculate a mortgage payment? Here’s the basic formula:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

That might look like gibberish, but it makes more sense if you know what the letters stand for:

M = Monthly mortgage payment

P = Principal loan amount

i = Monthly interest rate (annual interest rate divided by 12)

n = Total number of payments over the loan term

While you can plug these numbers into your phone calculator, it’s much easier to use an online calculator. Mortgage-specific calculators know how to plug the numbers in the right order and give you the results you need.

How to save money on your mortgage: 7 tips

Home affordability calculators ask a few details about your finances and tell you how big of a mortgage you can afford. But sometimes mortgage payments go up because of property taxes, homeowners insurance premiums, and other fees that increase over time. And sometimes financial situations change — which could be a layoff, a growing family, or an unexpected medical event.

If you’re ready to buy a new home or want to learn how to lower your mortgage payment, these tips can help:

If you can afford a higher monthly payment and want to pay less over the life of the loan, a 15-year loan term is a better choice than the traditional 30-year mortgage because you’ll pay a lot less in interest. A 30-year loan term may be your best bet if saving money in the short term is more important, but you’ll pay more in the long run. It’s up to you and your situation.

Backed by the FHA, these loans are a great option for borrowers who don’t qualify for a conventional loan. The FHA has more lenient credit score requirements and offers loans with as little as 3.5% down, making homeownership more accessible to people without a lot of money in savings and those who wouldn’t qualify with conventional lenders.

If a home is out of your price range, you risk becoming house-poor. This is a term for people who spend a disproportionately large amount of their income on housing-related costs, leaving very little for necessities, savings, and discretionary spending.
A lower purchase price directly translates to a smaller loan amount, resulting in lower monthly payments and less interest paid overall. Consider downsizing or house-hunting in a more affordable area. As an added bonus, smaller homes are usually cheaper to heat, cool, and maintain.

What seems like a small difference in interest rate can have a major impact on your monthly payment and total interest costs. Shop around with multiple lenders to compare rates, and consider using a trusted mortgage broker for help finding the best deal. And don’t forget to read the fine print in case there are hidden fees.

The bigger your down payment, the less you have to borrow. And if you can increase your down payment to 20% or more, you’ll save even more money by avoiding PMI

Some lenders let you pay your mortgage biweekly. If you’ve been making your mortgage payment once a month, consider paying half the regular monthly amount every other week instead. Since there are 52 weeks in a year, you’ll make 26 half-mortgage payments — that’s one full extra payment per year, which will help you pay off the mortgage faster and save on interest.

Property taxes are calculated based on the home’s assessed value — what tax assessors think your home is worth. If you think your property taxes are higher than they should be, appealing the assessment could lower your tax bill, potentially saving you thousands of dollars each year.

Keep your credit goals in sight with EarnIn

A small difference in interest rates can make a big difference in monthly payments. And one of the best ways to improve your odds of landing a good APR is a strong credit score.

Start your mortgage process off on the right foot by checking your credit and addressing any issues before you apply. EarnIn’s Credit Monitoring tool lets you keep a close eye on your credit score³ at any time, for free. While you’re at it, try the Cash Out tool to access your pay as you work — up to $100 a day or up to $750 every pay period.